Can Technology Help Fix the Housing Market?

Here's and oversimplified way to thing about the housing problem. It's 90% a policy problem and 10% a technology problem. Todays technology allows you to build economy housing for $200 / sqft. That's pretty much no different from the 1960s when it also cost $200 / sqft. There has be no productivity growth in the construction industry [0]. But that's not the real problem! In San Francisco the median price per square foot is just over $1000 [1]. That's a gap of $800 /sqft between the raw production cost and the market value. That gap has nothing to do with technology and everything to do with policy (zoning, historical association, neighborhood review, environmental review, various other forms of NIMBYism). If we had a HUGE productivity boom in housing production, we could maybe knock 50% off the construction cost. That would save $100 per square foot. Only policy can help bring down the rest.

If you want to nerd out a bit, you can read Ed Glaeser who wrote a piece "The Economic Implications of Housing Supply" which seeks to calculate the Minimum Profitable Production Cost (MPPC) per square foot for every place in America. He then compares that to the actual price per square foot. Anytime there is a gap there is a huge public policy failure.

[0] https://www.economist.com/leaders/2017/08/17/the-constructio... [1] https://www.zillow.com/san-francisco-ca/home-values/ [2] https://pubs.aeaweb.org/doi/pdf/10.1257/jep.32.1.3

This is the key line "the fundamental tension [is] that Americans want housing to be both affordable and a good investment."

You can't have both! You cannot have your home be a good investment because prices keep rising and have homes be affordable. We have a national narrative that the best path to wealth accumulation is through home ownership. That is a terrible terrible narrative to promote. You can make it true, but only if you massively subsidize home ownership (which we do) and make in incredibly difficult to build homes in desirable locations like most of California (yup we do that too).

We need a new national narrative. Housing is not a tool for wealth accumulation. A home is a place to live. The cheaper that place is the more people will be able to live in one.

Start fighting zoning laws and you will pay for your housing with the time you spend to commute - because traffic will become insane as cities will be overfilled with people who will live in new unrestricted density communities.

There is no problem with housing costs. A median existing house in U.S., as well as just in any country, is affordable for the majority of people. Problem is concentration: there are few places where people want to live and costs in these places are insane. And it has no fix because this is dictated with how digitalized economy where almost every success is infinitely scalable, works. Face it: housing is about social competition, 1% will pay a lot for their places, 99% will be quasi-unemployed, that's how the future will look.